Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009              or             

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-12289

SEACOR Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   13-3542736

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

2200 Eller Drive, P.O. Box 13038,   33316
Fort Lauderdale, Florida   (Zip Code)
(Address of Principal Executive Offices)  

954-523-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ¨    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x   Accelerated filer  ¨  

Non-accelerated filer  ¨

(Do not check if a smaller

reporting company)

  Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act). Yes  ¨    No  x

The total number of shares of common stock, par value $.01 per share, outstanding as of July 27, 2009 was 20,203,607. The Registrant has no other class of common stock outstanding.

 

 

 


Table of Contents

SEACOR HOLDINGS INC.

Table of Contents

 

Part I.    Financial Information    3
       
   Item 1.   Financial Statements (Unaudited)    3
       
    

Condensed Consolidated Balance Sheets as of June 30, 2009

and December 31, 2008

   3
       
    

Condensed Consolidated Statements of Income for the

Three and Six Months Ended June 30, 2009 and 2008

   4
       
    

Condensed Consolidated Statement of Changes in Equity for the

Six Months Ended June 30, 2009

   5
       
    

Condensed Consolidated Statements of Cash Flows for the

Six Months Ended June 30, 2009 and 2008

   6
       
     Notes to Condensed Consolidated Financial Statements    7
       
   Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations    24
       
   Item 3.   Quantitative and Qualitative Disclosures About Market Risk    41
       
   Item 4.   Controls and Procedures    41
       
Part II.    Other Information    42
       
   Item 1A.   Risk Factors    42
       
   Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds    42
       
   Item 4.   Submission of Matters to a Vote of Security Holders    43
       
   Item 6.   Exhibits    44

 

2


Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

    June 30,
2009
    December 31,
2008
 
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 415,626      $ 275,442   

Restricted cash

    20,838        20,787   

Marketable securities

    47,305        53,817   

Receivables:

   

Trade, net of allowance for doubtful accounts of $4,199 and $5,730 in 2009 and 2008, respectively

    251,111        277,350   

Other

    60,373        40,141   

Inventories

    68,082        66,278   

Deferred income taxes

    5,164        5,164   

Prepaid expenses and other

    14,734        10,499   
               

Total current assets

    883,233        749,478   
               

Property and Equipment

    2,801,446        2,741,322   

Accumulated depreciation

    (692,084     (601,806
               

Net property and equipment

    2,109,362        2,139,516   
               

Investments, at Equity, and Receivables from 50% or Less Owned Companies

    150,862        150,062   

Construction Reserve Funds & Title XI Reserve Funds

    265,586        305,757   

Goodwill

    53,581        51,496   

Intangible Assets

    26,018        28,478   

Other Assets, net of allowance for doubtful accounts of $888 in 2008

    48,053        34,867   
               
  $ 3,536,695      $ 3,459,654   
               
LIABILITIES AND EQUITY    

Current Liabilities:

   

Current portion of long-term debt

  $ 11,834      $ 33,671   

Current portion of capital lease obligations

    921        907   

Accounts payable and accrued expenses

    93,908        102,798   

Other current liabilities

    157,030        139,425   
               

Total current liabilities

    263,693        276,801   
               

Long-Term Debt

    861,096        895,689   

Capital Lease Obligations

    7,178        7,685   

Deferred Income Taxes

    543,075        515,455   

Deferred Gains and Other Liabilities

    111,939        121,796   
               

Total liabilities

    1,786,981        1,817,426   
               

Equity:

   

SEACOR Holdings Inc. stockholders’ equity:

   

Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding

             

Common stock, $.01 par value, 60,000,000 shares authorized; 32,555,149 and 32,390,838 shares issued in 2009 and 2008, respectively

    326        324   

Additional paid-in capital

    962,990        956,457   

Retained earnings

    1,498,073        1,402,771   

Shares held in treasury of 12,354,222 and 12,373,291 in 2009 and 2008, respectively, at cost

    (723,650     (724,357

Accumulated other comprehensive income (loss):

   

Cumulative translation adjustments, net of tax

    1,602        (5,045

Derivative gain on cash flow hedges, net of tax

    716          
               
    1,740,057        1,630,150   

Noncontrolling interests in subsidiaries

    9,657        12,078   
               

Total equity

    1,749,714        1,642,228   
               
  $ 3,536,695      $ 3,459,654   
               
   

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

 

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Table of Contents

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data, unaudited)

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2009     2008     2009     2008  

Operating Revenues

  $ 389,233      $ 408,967      $ 788,749      $ 763,422   
                               

Costs and Expenses:

       

Operating

    256,131        274,304        504,543        509,344   

Administrative and general

    40,058        45,095        78,740        84,100   

Depreciation and amortization

    39,828        37,728        79,092        75,528   
                               
    336,017        357,127        662,375        668,972   
                               

Gains (Losses) on Asset Dispositions and Impairments, Net

    (15     19,274        16,745        31,180   
                               

Operating Income

    53,201        71,114        143,119        125,630   
                               

Other Income (Expense):

       

Interest income

    578        5,373        1,621        12,849   

Interest expense

    (14,075     (14,625     (28,412     (28,116

Debt extinguishment gains (losses), net

    (78     (1     1,285        (1

Marketable security gains (losses), net

    11,829        383        7,848        (5,301

Derivative gains (losses), net

    3,765        (7,113     7,376        (646

Foreign currency gains, net

    6,847        604        7,505        3,214   

Other, net

    (1     162        189        326   
                               
    8,865        (15,217     (2,588     (17,675
                               

Income Before Income Tax Expense and Equity In Earnings of 50% or Less Owned Companies

    62,066        55,897        140,531        107,955   

Income Tax Expense

    22,916        19,933        51,115        39,723   
                               

Income Before Equity in Earnings of 50% or Less Owned Companies

    39,150        35,964        89,416        68,232   

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

    3,491        1,315        7,018        5,894   
                               

Net Income

    42,641        37,279        96,434        74,126   

Net Income attributable to Noncontrolling Interests in Subsidiaries

    333        191        1,132        393   
                               

Net Income attributable to SEACOR Holdings Inc.

  $ 42,308      $ 37,088      $ 95,302      $ 73,733   
                               

Basic Earnings Per Common Share of SEACOR Holdings Inc.

  $ 2.13      $ 1.74      $ 4.81      $ 3.37   

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

  $ 1.91      $ 1.57      $ 4.27      $ 3.06   

Weighted Average Common Shares Outstanding:

       

Basic

    19,844,579        21,363,065        19,803,406        21,853,360   

Diluted

    23,528,365        25,170,903        23,511,361        25,691,551   

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands, unaudited)

 

    SEACOR Holdings Inc. Stockholders’ Equity                  
    Common
Stock
  Additional
Paid-In
Capital
    Retained
Earnings
    Shares
Held In
Treasury
    Accumulated
Other
Comprehensive
Income (Loss)
    Non-
Controlling
Interests In
Subsidiaries
    Total
Equity
    Comprehensive
Income

December 31, 2008, previously reported

  $ 324   $ 922,540      $ 1,421,712      $ (724,357   $ (5,045   $ 12,078      $ 1,627,252     

Adoption of FSP APB 14-1 (see note 8)

        33,917        (18,941                          14,976     
                                                       

December 31, 2008, as adjusted

    324     956,457        1,402,771        (724,357     (5,045     12,078        1,642,228     

Issuance of common stock:

               

Employee Stock Purchase Plan

                      1,228                      1,228     

Exercise of stock options

        943                                    943     

Director stock awards

        186                                    186     

Restricted stock and restricted stock units

    2     (780            (16                   (794  

Amortization of share awards

        5,961                                    5,961     

Cancellation of restricted stock

        505               (505                       

Conversion option on purchased Convertible Debentures

        (282                                 (282  

Purchase of subsidiary shares from noncontrolling interests

                                    (5,501     (5,501  

Acquisition of a subsidiary with noncontrolling interests

                                    3,043        3,043     

Sale of a subsidiary with noncontrolling interests

                                    (27     (27  

Dividends paid to noncontrolling interests

                                    (1,068     (1,068  

Comprehensive income:

               

Net income

               95,302                      1,132        96,434      $ 96,434

Other comprehensive income

                             7,363               7,363        7,363
                                                           

Six months ended June 30, 2009

  $ 326   $ 962,990      $ 1,498,073      $ (723,650   $ 2,318      $ 9,657      $ 1,749,714      $ 103,797
                                                           
               

The accompanying notes are an integral part of these consolidated financial statements

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

     Six Months Ended
June 30,
 
     2009     2008  

Net Cash Provided by Operating Activities

   $  188,629      $ 135,802   
                

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (77,052     (233,093

Proceeds from disposition of property and equipment

     55,544        63,843   

Purchases of marketable securities

            (159,769

Proceeds from sales of marketable securities

            83,833   

Cash settlements on derivative transactions, net

     (380     6,671   

Investments in and advances to 50% or less owned companies

     (6,370     (4,950

Return of investments and advances from 50% or less owned companies

     2,036        229   

Proceeds on sale of investments in 50% or less owned companies

     136          

(Advances) principal payments on third party notes receivable, net

     (133     383   

Net (increase) decrease in restricted cash

     (51     552   

Net decrease in construction reserve funds and title XI reserve funds

     40,171        134,643   

Net increase in escrow deposits on like-kind exchanges

            (1,204

(Investments in) repayments on leases, net

     (1,938     35   

Business acquisitions, net of cash acquired

     (1,473     (4,302

Cash disposed on sale of subsidiary, net of cash proceeds on sale

     (154       
                

Net cash provided by (used in) investing activities

     10,336        (113,129
                

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (91,474     (8,740

Proceeds from issuance of long-term debt, net of offering costs

     25,000        6,002   

Common stock acquired for treasury

            (142,705

Proceeds and tax benefits from share award plans

     1,463        3,646   

Purchase of subsidiary shares from noncontrolling interests

     (1,210       

Cash received from (dividends paid to) noncontrolling interests, net

     (1,068     2,030   
                

Net cash used in financing activities

     (67,289     (139,767
                

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     8,508        2,358   

Net Increase (Decrease) in Cash and Cash Equivalents

     140,184        (114,736
                

Cash and Cash Equivalents, Beginning of Period

     275,442        537,305   
                

Cash and Cash Equivalents, End of Period

   $ 415,626      $ 422,569   
                
    

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation

The condensed consolidated financial information for the three and six months ended June 30, 2009 and 2008 has been prepared by the Company and has not been audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to present fairly the Company’s financial position as of June 30, 2009, its results of operations for the three and six months ended June 30, 2009 and 2008, its changes in equity for the six months ended June 30, 2009 and its cash flows for the six months ended June 30, 2009 and 2008. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The Company has performed an evaluation of subsequent events through the date of the filing of this Quarterly Report on Form 10-Q.

Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to SEACOR Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR” refers to SEACOR Holdings Inc.

Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51. SFAS No. 160 amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. This standard defines a noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to the Company. SFAS No. 160 requires, among other items, that a noncontrolling interest be included in the consolidated statement of financial position within equity separate from the Company’s equity; consolidated net income to be reported at amounts inclusive of both the Company’s and noncontrolling interest’s shares and, separately, the amounts of consolidated net income attributable to the Company and noncontrolling interest all on the consolidated statement of income; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. The presentation and disclosure requirements of SFAS No. 160 were applied retrospectively. Other than the change in presentation of noncontrolling interests and its inclusion in comprehensive income, the adoption of SFAS No. 160 had no impact on the Company’s consolidated financial position or its results of operations.

 

2. Financial Instruments

The fair value of an asset or liability, as defined by SFAS No. 157, Fair Value Measurements, is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in

 

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active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s assets and liabilities as of June 30, 2009 that are measured at fair value on a recurring basis are summarized below (in thousands):

 

     Level 1    Level 2    Level 3

ASSETS

        

Marketable securities

   $ 39,995    $   7,310    $   —

Derivative instruments

     2,365      5,194     

Construction reserve funds and Title XI reserve funds

     265,586          

LIABILITIES

        

Short sale of marketable securities (included in other current liabilities)

     12,936          

Derivative instruments

     679      1,867     

Effective January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP SFAS No. 157-2”), with no material impact on its consolidated financial position or its results of operations. FSP SFAS No. 157-2 deferred for one year the effective date of SFAS No. 157 for certain nonfinancial assets and certain nonfinancial liabilities.

The estimated fair value of the Company’s other financial assets and liabilities as of June 30, 2009 are as follows (in thousands):

 

     Carrying
Amount
   Estimated
Fair Value

ASSETS

     

Cash, cash equivalents and restricted cash

   $   436,464    $ 436,464

Investments, at cost, in 50% or less owned companies

     7,506      see below

Notes receivable from other business ventures

     15,823      see below

LIABILITIES

     

Long-term debt, including current portion

     872,930      887,468

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was not practicable to estimate the fair value of the Company’s notes receivable from other business ventures because the timing of settlement of these notes is not certain. Considerable judgment was required in developing certain of the estimates of fair value and accordingly the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Marketable Securities. For the three months ended June 30, 2009 and 2008, marketable security gains (losses), net includes gains of $7.7 million and $0.3 million, respectively, related to marketable security positions held by the Company as of June 30, 2009. For the six months ended June 30, 2009 and 2008, marketable security gains (losses), net includes gains of $6.5 million and $0.4 million, respectively, related to marketable security positions held by the Company as of June 30, 2009.

 

3. Derivative Instruments and Hedging Strategies

Effective January 1, 2009, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosure for derivative instruments and hedging activities about how and why an entity uses derivative instruments and

 

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hedges and how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.

The Company accounts for derivatives in accordance with SFAS No. 133. All of the Company’s derivative positions are stated at fair value in the accompanying condensed consolidated balance sheets. Realized and unrealized gains and losses on derivatives not designated as hedges under SFAS No. 133 are reported in the accompanying condensed consolidated statements of income as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as fair value hedges are recognized as corresponding increases or decreases in the fair value of the underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying condensed consolidated statements of income as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges are reported as a component of other comprehensive income in the accompanying condensed consolidated statement of changes in equity to the extent they are effective and reclassified into earnings on the same line item associated with the hedged transaction and in the same period the hedged transaction affects earnings. Any ineffective portion of cash flow hedges are reported in the accompanying condensed consolidated statements of income as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges that are entered into by the Company’s equity method investees are also reported as a component of the Company’s other comprehensive income in proportion to the Company’s ownership percentage in the investee, with reclassifications and ineffective portions being included in equity in earnings of 50% or less owned companies in the accompanying condensed consolidated statements of income.

Derivative instruments are classified as either assets or liabilities based on their individual fair values. Derivative assets and liabilities are included in other receivables and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. The fair values of the Company’s derivative instruments as of June 30, 2009 are as follows (in thousands):

 

     Derivative
Asset
   Derivative
Liability

Derivatives designated as hedging instruments under SFAS No. 133:

     

Forward currency exchange contracts (fair value hedges)

   $ 1,765    $

Interest rate swap agreements (cash flow hedges)

     1,239     
             
     3,004     
             

Derivatives not designated as hedging instruments under SFAS No. 133:

     

Options on equities and equity indices

          244

Forward currency exchange, option and future contracts

     1,661      1,864

Interest rate swap agreements

          250

Commodity swap, option and future contracts:

     

Exchange traded

     2,340     

Non-exchange traded

     554      102

U.S. treasury notes and bond future and option contracts

          86
             
     4,555      2,546
             
   $ 7,559    $ 2,546
             

The Company evaluates the risk of counterparty default by monitoring the financial condition of the financial institutions and counterparties involved and by primarily conducting business with large, well-established financial institutions and diversifying its counterparties. The Company does not currently anticipate nonperformance by any of its significant counterparties.

 

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Fair Value Hedges. As of June 30, 2009, the Company has designated certain of its forward currency exchange contracts with notional values of €16.0 million as fair value hedges under SFAS No. 133 in respect of capital commitments denominated in euros for assets scheduled to be delivered in 2010. By entering into these forward currency exchange contracts, the Company has fixed a portion of its euro capital commitments in U.S. dollars to protect against currency fluctuations. During the six months ended June 30, 2009, the Company designated €15.0 million notional value of its forward currency exchange contracts as fair value hedges under SFAS No. 133, in addition to €20.0 million previously so designated as of December 31, 2008. During the six months ended June 30, 2009, the Company no longer designated €19.0 million notional value of these contracts as fair value hedges under SFAS No. 133.

For the six months ended June 30, 2009, the Company recognized gains (losses) on derivative instruments designated as fair value hedges as follows (in thousands):

 

     Derivative gains
(losses), net
 

Forward currency exchange contracts, effective and ineffective portions

   $ (203

Increase in fair value of hedged items included in property and equipment corresponding to effective portion of derivative losses

     516   
        
   $ 313   
        
  

Cash Flow Hedges. The Company has entered into various interest rate swap agreements which have been designated as cash flow hedges under the provisions of SFAS No. 133. Additionally, one of the Company’s Offshore Marine Services joint ventures has entered into an interest rate swap agreement which has also been designated as a cash flow hedge under the provisions of SFAS No. 133. These instruments call for the Company or the joint venture to pay fixed interest rates on the notional value and receive in return a variable interest rate based on LIBOR on the notional value. By entering into these interest rate swap agreements, the Company has converted the variable LIBOR component of its outstanding borrowings to a fixed interest rate to protect against interest rate fluctuations. The terms of derivative instruments designated as cash flow hedges as of June 30, 2009 are as follows:

 

Notional Amount

   Maturity
Date
   Fixed
Rate
    Variable
Rate

$25,000,000

   03/24/14    2.25   LIBOR

$25,000,000

   03/24/14    2.335   LIBOR

$29,600,000(1)

   12/30/14    3.05   LIBOR

 

(1) Cash flow hedge entered into by one of the Company’s 50% owned Offshore Marine Services joint ventures.

For the six months ended June 30, 2009, the Company recognized gains (losses) on derivative instruments designated as cash flow hedges as follows (in thousands):

 

     Other
comprehensive
income (loss)
    Derivative gains
(losses), net
 

Interest rate swap agreements, effective portion

   $ 1,265      $   

Interest rate swap agreements, ineffective portion

            (250

Reclassification of derivative gains to interest expense or equity in earnings of 50% or less owned companies

     (163       
                
   $ 1,102      $ (250
                

 

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Other Derivative Instruments. For the six months ended June 30, 2009, the Company recognized gains (losses) on derivative instruments not designated as hedging instruments under SFAS No. 133 as follows (in thousands):

 

     Derivative gains
(losses), net
 

Options on equities and equity indices

   $ 2,627   

Forward currency exchange, option and future contracts

     2,921   

Interest rate swap agreements

     137   

Commodity swap, option and future contracts:

  

Exchange traded

     (502

Non-exchange traded

     2,153   

U.S. treasury notes and bond future and option contracts

     (23
        
   $ 7,313   
        

The Company holds positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the underlying equity security or index. The Company’s investment in equity options primarily includes positions in energy, marine, transportation and other related businesses. These contracts are typically entered into to mitigate the risk of changes in market value of marketable security positions that the Company is either about to acquire, has acquired or is about to dispose of.

The Company has entered into and settled positions in various forward currency exchange, option and future contracts with respect to the pound sterling, euro, yen, rupee, Singapore dollar, won, Taiwanese dollar, Thai baht, ringgit, dinar, renminbi, dirham, Brazilian real and rand. As of June 30, 2009, the outstanding forward currency exchange contracts translate to a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $5.0 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the Company’s business conducted in Europe, Africa, South America, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates beyond twelve months. Subsequent to June 30, 2009, the Company entered into a $5.0 million U.S. dollar equivalent forward currency exchange contract.

The Company has entered into various interest rate swap agreements which call for the Company to pay fixed interest rates ranging from 1.79% to 2.85% on aggregate notional values of $68.0 million and receive in return variable interest rates based on LIBOR on these notional values. These instruments mature in 2012 through 2013. By entering into these interest rate swap agreements, the Company is protecting against interest rate fluctuations on the variable LIBOR component of its outstanding or anticipated borrowings. These instruments do not currently qualify as cash flow hedges under the provisions of SFAS No. 133. Subsequent to June 30, 2009, the Company entered into additional interest rate swap agreements which call for the Company to pay fixed interest rates ranging from 2.46% to 2.59% on aggregate notional values of $83.5 million and receive in return variable interest rates based on LIBOR on these notional values.

The Company has entered into and settled positions in various commodity swap, option and future contracts (primarily natural gas, crude oil, gasoline and ethanol). The general purpose of these transactions is to provide value to the Company should there be a sustained decline in the price of commodities that over time could lead to a reduction in the market values and cash flows of the Company’s offshore, inland river and commodity trading businesses.

The Company has also entered into and settled various future contracts with unrelated third parties to buy and sell commodities. These contracts are non-exchange traded and typically result in physical delivery of the underlying commodity. As of June 30, 2009, the Company carried ethanol inventory relating to the physical delivery of product from these transactions with a carrying value of $13.1 million.

 

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The Company has entered into and settled various positions in U.S. treasury notes and bonds through futures or options on futures tied to U.S. treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. treasury notes and bonds decline, leading to generally higher interest rates, which if sustained over time, might lead to higher interest costs for the Company.

 

4. Business Acquisitions

Effective January 1, 2009, the Company adopted SFAS No. 141(R), Business Combinations. SFAS No. 141(R) amended the Company’s accounting policy by requiring the Company to recognize on its future acquisitions, with certain exceptions, 100 percent of the fair value of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity. It establishes that shares issued in consideration for a business combination be at fair value on the acquisition date, requires the recognition of contingent consideration arrangements at their acquisition-date fair values with subsequent changes in fair value generally reflected in earnings, and requires recognition of pre-acquisition loss and gain contingencies at their acquisition-date fair values. It also provides for the capitalization of in-process research and development assets acquired, requires acquisition-related transaction costs to be expensed as incurred, allows for the capitalization of acquisition-related restructuring costs only if the criteria in SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, are met as of the acquisition date, and requires as an adjustment to income tax expense any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals.

V & A Acquisition. On May 21, 2009, the Company acquired a controlling interest in V&A Commodity Traders, Inc. (“V&A”), a sugar trading business, for $4.0 million. The Company’s purchase price included cash consideration of $1.3 million and forgiveness of a note due from V&A of $2.7 million. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The fair value of assets and liabilities acquired was finalized in June 2009.

SRI Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Solid Resources, Inc. and Solid Resources, LLC (collectively referred to as “SRI”), providers of environmental services in the southeastern United States. The selling stockholder of SRI has the opportunity to receive additional consideration of up to $39.5 million based upon certain performance measures over the period from the date of acquisition through September 30, 2011, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 2009, the Company paid $1.2 million of additional consideration in accordance with the acquisition agreement and recorded the consideration as goodwill in the accompanying condensed consolidated balance sheets.

Link Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Link Associates International Global Limited (“Link”), a provider of environmental services in the United Kingdom. The selling stockholder of Link has the opportunity to receive additional consideration of up to £2.8 million based upon certain performance measures during the period from the date of acquisition through May 31, 2010, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 2009, the Company paid £61,560 ($0.1 million) of additional consideration in accordance with the acquisition agreement and recorded the consideration as goodwill in the accompanying condensed consolidated balance sheets.

RMA Acquisition. On October 1, 2006, the Company acquired all of the issued and outstanding shares of Response Management Associates, Inc. (“RMA”), a provider of environmental consulting services. The selling stockholder of RMA has the opportunity to receive additional consideration of $8.5 million based upon certain performance measures over the period from the date of the acquisition through September 30, 2012, which will

 

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be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 2009, the Company paid $0.5 million of additional consideration in accordance with the acquisition agreement and recorded the consideration as goodwill in the accompanying condensed consolidated balance sheets.

Purchase Price Allocation. The following table summarizes for the six months ended June 30, 2009, the allocation of the purchase price for the Company’s acquisitions (in thousands):

 

Trade and other receivables

   $ 6,045   

Other current assets

     2,341   

Investments in Equity, and Receivables from 50% or Less Owned Companies

     (5,109

Property and equipment

     137   

Goodwill

     1,780   

Other Assets

     177   

Accounts payable and other current liabilities

     (829

Deferred Gains and Other Liabilities

     (26

Noncontrolling Interests

     (3,043
        

Purchase price(1)

   $ 1,473   
        

 

(1) Purchase price is net of cash acquired of $1.6 million.

 

5. Equipment Acquisitions, Dispositions and Depreciation Policy

During the six months ended June 30, 2009, capital expenditures were $77.1 million. Equipment deliveries during the period included two offshore support vessels, one inland river towboat and four helicopters.

During the six months ended June 30, 2009, the Company sold 14 offshore support vessels, four inland river dry cargo barges, three harbor tugs and other equipment. In addition, two helicopters were scrapped and one helicopter was declared a total loss after an accident in the North Sea. The Company received $55.5 million on the disposition of these assets, including the insurance proceeds for the helicopter, and recognized net gains of $16.7 million.

Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

 

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As of June 30, 2009, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore support vessels

   20

U.S.-flag tankers(1)

   25

Inland river dry cargo and deck barges

   20

Inland river liquid tank barges

   25

Inland river towboats

   25

Helicopters

   12

Harbor and offshore tugs(2)

   25

Ocean liquid tank barges

   25

 

(1) Subject to Oil Pollution Act of 1990 (“OPA 90”) requirements.

 

(2)

Effective April 1, 2008, the Company changed its estimated useful life for newly built harbor and offshore tugs from 40 to 25 years and reduced the remaining useful life of certain vessels within its harbor and offshore tug fleet due to the more frequent occurrence of technological advancements in vessel design. These changes in estimates did not materially impact the comparability of financial information for the periods presented.

 

6. Investments at Equity and Receivables from 50% or Less Owned Companies

Dart. On July 22, 2008, a wholly owned subsidiary of the Company, Era DHS LLC, acquired 49% of the capital stock of Dart Helicopter Services LLC (“Dart”) for cash consideration of $21.0 million. Dart is an international sales, marketing and manufacturing organization focusing on after-market helicopter accessories. The Company has performed a preliminary fair value analysis of Dart as of the acquisition date. The excess of the purchase price over the Company’s interest in Dart’s net assets has been initially allocated to intangible assets and goodwill in the amount of $9.8 million each. The fair value analysis is not yet complete.

 

7. Commitments and Contingencies

The Company’s unfunded capital commitments as of June 30, 2009 consisted primarily of offshore support vessels, helicopters, ocean liquid tank barges and inland river towboats and totaled $117.4 million, of which $48.1 million is payable during the remainder of 2009 and the balance is payable through 2011. Of the total unfunded capital commitments, $20.9 million may be terminated without further liability other than the payment of liquidated damages of $3.0 million in the aggregate. Subsequent to June 30, 2009, the Company committed to purchase additional equipment for $3.7 million, of which $1.1 million is payable during the remainder of 2009 and the balance is payable through 2011.

The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter agreement that expires in 2011. In addition, the Company has guaranteed amounts owed under banking facilities by certain of its joint ventures and has issued a performance guarantee on behalf of one of its joint ventures. As of June 30, 2009, the total amount guaranteed by the Company under these arrangements was $24.3 million. Additionally, as of June 30, 2009, the Company had an uncalled capital commitment to one of its joint ventures for $2.8 million.

In the normal course of its business, the Company becomes involved in various litigation matters including, among other things, claims by third parties for alleged property damages, personal injuries and other matters. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto as appropriate. It is possible that a change in the Company’s estimates related to these exposures could occur, but the Company does not expect such changes in estimated costs will have a material effect on the Company’s consolidated financial position or its results of operations.

 

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Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran. Relating to these prohibitions, Seabulk International, Inc. (“Seabulk”), a subsidiary of SEACOR acquired in July 2005, filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury in December 1999 and January and May 2002. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three Seabulk vessels that called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels that called in Iran in 1998. In March 2003, Seabulk received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against Seabulk or certain individuals who knowingly participated in such activity. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its consolidated financial position or its results of operations.

During 2006 and 2007, Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, or Jones Act, trade which is restricted to vessels built or rebuilt in the United States. In May 2005, MTS received a determination from the U.S. Coast Guard (“USCG”), which administers the United States build requirements of the Jones Act, concluding the retro-fit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS completed the retrofit work in the foreign shipyard in reliance upon the USCG’s determination, which MTS believes was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia, Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al. , No. 1:07cv665 (E.D. Va.) (the “SB Trader Litigation”), in which they sought to have the court set aside the USCG’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending its determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment by Shipbuilders setting aside the USCG’s determination and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement of the Seabulk Trader. On April 30, 2008, MTS appealed the decision to the U.S. Court of Appeals for the Fourth Circuit (the “Court of Appeals”), and the lower court’s decision has been stayed pending appeal, subject to certain terms (which MTS has also separately appealed). Those terms require that MTS pay to the plaintiffs 12.5% of the revenue generated by the Seabulk Trader from November 7, 2008 in the event that the Court of Appeals affirms the lower court’s decision to revoke its coastwise endorsement. On July 2, 2008, Shipbuilders commenced a second civil action in the U.S. District Court for the Eastern District of Virginia, entitled Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:08cv680 (E.D. Va.) (the “SB Challenge Litigation”), alleging essentially identical claims as those asserted in the SB Trader Litigation against MTS’s second retrofitted tanker, the Seabulk Challenge. MTS has intervened in the SB Challenge Litigation, which has been stayed pending the decision of the Court of Appeals in the SB Trader Litigation. The loss of coastwise eligibility for its two retrofitted tankers could adversely affect the Company’s financial condition and its results of operations. The aggregate carrying value of the Company’s two retro-fitted tankers was $56.5 million as of June 30, 2009 and such tankers contributed operating revenues of $13.2 million during the six months ended June 30, 2009.

Certain subsidiaries of the Company are participating employers in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Officers Pension Fund (“MNOPF”). Under the direction of a court order, any deficit of the MNOPF is to be remedied through funding contributions from all participating employers. The Company’s participation relates to officers employed between 1978 and 2002 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation of the MNOPF in 2003, the Company was invoiced and expensed $4.4 million in

 

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2005, representing the Company’s allocated share of a total funding deficit of $412.0 million. Subsequent to this invoice, the pension fund trustees determined that $49.0 million of the $412.0 million deficit was deemed uncollectible due to the non-existence or liquidation of certain participating employers and the Company was invoiced and expensed $0.6 million in March 2007 for its allocated share of the uncollectible deficit. Based on an actuarial valuation of the MNOPF in 2006, the Company was invoiced and expensed $3.9 million in September 2007, representing the Company’s allocated share of an additional funding deficit of $332.6 million. Depending on the results of future actuarial valuations, it is possible that the MNOPF will experience further funding deficits requiring the Company to recognize payroll related operating expenses in the periods invoices are received. A funding update as of March 2008 indicated that an additional funding deficit of $116.2 million had developed over the two years since the last actuarial valuation in 2006. No invoices in respect of this deficit will be issued to participating employers until the results of the latest actuarial valuation, carried out in March 2009, are available. Should the deficit be maintained at current levels through the March 2009 actuarial valuation, the Company estimates its share of the uninvoiced deficit to be approximately $1.5 million.

A subsidiary of the Company is a participating employer in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Ratings Pension Fund (“MNRPF”). The Company’s participation relates to ratings employed between 1978 and 2001 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation in March 2008, the MNRPF has an accumulated funding deficit of $284.2 million. No decision has yet been reached as to how the deficit will be recovered but the Company expects it is likely that participating employers will be invoiced for their allocated share, at which time the Company would recognize payroll related operating expenses. The Company estimates its allocated share of the uninvoiced deficit to be approximately $1.0 million.

On June 12, 2009, a purported civil class action was filed against SEACOR, Era Group Inc., Era Aviation, Inc., Era Helicopters LLC and two other defendants (collectively the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v. Bristow Group Inc., et al., No. 09-CV-438 (D.Del.). SEACOR acquired the Era group of companies in December 2004. The complaint alleges that the Defendants violated federal antitrust laws by conspiring with each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to December 2005. The purported class of plaintiffs includes all direct purchasers of such services and the relief sought includes compensatory damages and treble damages. The Company is unable to estimate the potential exposure, if any, resulting from these claims but believes they are without merit and intends to vigorously defend the action.

 

8. Long-Term Debt and Capital Lease Obligations

As of June 30, 2009, the Company had $125.0 million of outstanding borrowings under its revolving credit facility. The remaining availability under this facility was $322.9 million, net of issued letters of credit of $2.1 million. In addition, the Company had other outstanding letters of credit totaling $46.7 million with various expiration dates through 2012.

During the six months ended June 30, 2009, the Company made principal repayments of $29.4 million on its long-term debt and capital lease obligations excluding debt purchases (see note 9).

Effective January 1, 2009, the Company adopted FASB Staff Position, Accounting Principles Board 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”). FSP APB 14-1 requires issuers of convertible debt to account separately for the liability and equity components in a manner that reflects the issuers’ non-convertible debt borrowing rate. The resulting debt discount is amortized over the period the debt is expected to be outstanding as additional non-cash interest expense. Upon adopting FSP APB 14-1, the Company recorded the impact on a retrospective basis for all periods presented and adjusted previously reported equity as of December 31, 2008 by increasing additional paid-in capital $33.9 million and reducing retained earnings $18.9 million. For the six months ended June 30, 2009 and 2008, the impact of adopting FSP APB 14-1 on the Company’s condensed consolidated

 

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statements of income was an additional $4.0 million and $3.7 million of pre-tax, non-cash interest expense, respectively. For the six months ended June 30, 2009 and 2008, the impact of the adoption on basic earnings per share was a reduction of $0.13 and $0.11 per share, respectively.

 

9. Stock and Debt Repurchases

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), and its 2.875% Convertible Debentures due 2024. During the six months ended June 30, 2009, the Company repurchased $3.8 million in principal amount of its 2.875% Convertible Debentures due 2024 for $3.7 million. During the six months ended June 30, 2008, the Company acquired for treasury 1,658,317 shares of Common Stock for an aggregate purchase price of $142.7 million. As of June 30, 2009, the remaining authority under the repurchase plan was $145.5 million.

Additionally, the Company may purchase, separate from such authorization noted above, any or all of its 7.2% Senior Notes due 2009, its 5.875% Senior Notes due 2012 and its 9.5% Senior Notes due 2013. During the six months ended June 30, 2009, the Company purchased $1.0 million in principal amount of its 5.875% Senior Notes due 2012, $37.0 million in principal amount of its 7.2% Senior Notes due 2009 and $20.2 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $58.4 million.

 

10. Acquisitions of Noncontrolling Interests

Effective January 1, 2009, the Company purchased the remaining noncontrolled subsidiary shares in a tank farm and handling facility in Sauget, Illinois and certain related leasehold improvements from a noncontrolling interest holder. The aggregate purchase price of $9.6 million included a note payable of $7.0 million, the forgiveness of a $2.3 million note receivable from the noncontrolling interest holder and cash consideration of $0.3 million.

Effective April 1, 2009, the Company purchased the remaining noncontrolled subsidiary shares in an offshore marine services company for $0.9 million.

 

11. Earnings Per Common Share of SEACOR

In accordance with SFAS No. 128, Earnings Per Share, basic earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of outstanding convertible debentures. For the three and six months ended June 30, 2009, diluted earnings per common share of SEACOR excluded 821,519 and 896,874, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive. For the three and six months ended June 30, 2008, diluted earnings per common share of SEACOR excluded 571,364 and 506,274, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

 

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Computations of basic and diluted earnings per common share of SEACOR are included in the table below (in thousands, except per share data). Certain prior period information has been retrospectively adjusted to reflect the adoption of FSP APB 14-1 (see note 8).

 

    For the Three Months Ended
June 30,
  For the Six Months
Ended June 30,
    Net
Income
  Average O/S
Shares
  Per
Share
  Net
Income
  Average O/S
Shares
  Per
Share

2009

           

Basic Earnings Per Common Share of SEACOR
Holdings Inc.

  $ 42,308   19,845   $ 2.13   $ 95,302   19,803   $ 4.81

Effect of Dilutive Securities, net of tax:

           

Options and Restricted Stock

      311         314  

Convertible Securities

    2,529   3,372       5,087   3,394  
                       

Diluted Earnings Per Common Share of SEACOR
Holdings Inc.

  $ 44,837   23,528   $ 1.91   $ 100,389   23,511   $ 4.27
                       

2008

           

Basic Earnings Per Common Share of SEACOR
Holdings Inc.

  $ 37,088   21,363   $ 1.74   $ 73,733   21,853   $ 3.37

Effect of Dilutive Securities, net of tax:

           

Options and Restricted Stock

      390         421  

Convertible Securities

    2,481   3,418       4,957   3,418  
                       

Diluted Earnings Per Common Share of SEACOR
Holdings Inc.

  $ 39,569   25,171   $ 1.57   $ 78,690   25,692   $ 3.06
                       

 

12. Comprehensive Income

For the three months ended June 30, 2009 and 2008, total comprehensive income was $50.6 million and $37.0 million, respectively. For the six months ended June 30, 2009 and 2008, total comprehensive income was $103.8 million and $71.3 million, respectively. Total comprehensive income for the three and six months ended June 30, 2008 has been retrospectively adjusted to reflect the adoption of SFAS No. 160 and FSP APB 14-1 (see notes 1 and 8). For the three and six months ended June 30, 2009, other comprehensive income consisted of gains and losses from foreign currency translation adjustments, net of tax, and derivative gains on cash flow hedges, net of tax (see note 3). For the three and six months ended June 30, 2008, other comprehensive income consisted of gains and losses from foreign currency translation adjustments, net of tax, and unrealized holding gains and gains on available-for-sale marketable securities, net of tax.

 

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13. Share Based Compensation

The following transactions have occurred in connection with the Company’s share based compensation plans during the six months ended June 30, 2009:

 

Director stock awards granted

   2,500   
      

Employee Stock Purchase Plan (“ESPP”) shares issued

   25,527   
      

Restricted stock awards granted

   141,250   
      

Restricted stock awards cancelled

   6,690   
      

Shares released from Deferred Compensation Plan

   1,207   
      

Restricted Stock Unit Activities:

  

Outstanding as of December 31, 2008

   1,445   

Granted

   600   

Converted to shares and issued to Deferred Compensation Plan

   (975
      

Outstanding as of June 30, 2009

   1,070   
      

Stock Option Activities:

  

Outstanding as of December 31, 2008

   1,129,685   

Granted

   128,825   

Exercised

   (19,586

Cancelled

   (31,625
      

Outstanding as of June 30, 2009

   1,207,299   
      

Shares available for future grants and ESPP purchases as of June 30, 2009

   1,747,392   
      
  

 

14. New Accounting Pronouncement

On May 15, 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 is effective on July 1, 2009. The Company does not expect the adoption of SFAS No. 162 will result in a change in its current accounting policies and as such will have no impact on its consolidated financial position or its results of operations.

 

15. Segment Information

Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative thresholds or meet certain other reporting requirements. Operating business segments have been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s basis of measurement of segment profit or loss has not changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

19


Table of Contents

The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments. Certain prior period information has been retrospectively adjusted to reflect the adoption of FSP APB 14-1 (see note 8).

 

    Offshore
Marine
Services
$’000
    Marine
Transportation
Services

$’000
  Inland
River
Services
$’000
  Aviation
Services

$’000
    Environmental
Services

$’000
  Commodity
Trading

$’000
  Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the three months ended June 30, 2009

                 

Operating Revenues:

                 

External customers

  145,436      24,095   26,842   57,699      33,167   85,852   16,142           389,233   

Intersegment

  1,030        3,321   1      8     99      (4,459     
                                             
  146,466      24,095   30,163   57,700      33,175   85,852   16,241      (4,459   389,233   
                                             

Costs and Expenses:

                 

Operating

  81,609      11,792   17,839   37,312      23,656   79,165   9,214      (4,456   256,131   

Administrative and general

  10,935      942   2,048   5,649      5,966   3,468   2,607      8,443      40,058   

Depreciation and amortization

  13,802      7,999   4,950   9,070      1,739   2   1,973      293      39,828   
                                             
  106,346      20,733   24,837   52,031      31,361   82,635   13,794      4,280      336,017   
                                             

Gains (Losses) on Asset Dispositions and Impairments, Net

  361        396   (1,104   4     330      (2   (15
                                             

Operating Income (Loss)

  40,481      3,362   5,722   4,565      1,818   3,217   2,777      (8,741   53,201   
                                             

Other Income (Expense):

                 

Derivative gains (losses), net

  (18       (78     588        3,273      3,765   

Foreign currency gains, net

  479      25     937      53   289   128      4,936      6,847   

Other, net

  (4              26        (23   (1

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  3,380        702   270      15   32   (908        3,491   
                                     

Segment Profit

  44,318      3,387   6,424   5,694      1,886   4,152   1,997       
                                     

Other Income (Expense) not included in Segment Profit

              (1,746

Less Equity Earnings included in Segment Profit

              (3,491
                     

Income Before Taxes and Equity Earnings

              62,066   
                     
                 

 

20


Table of Contents
    Offshore
Marine
Services
$’000
    Marine
Transportation
Services
$’000
    Inland
River
Services
$’000
  Aviation
Services
$’000
    Environmental
Services
$’000
  Commodity
Trading
$’000
  Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the six months ended June 30, 2009

                 

Operating Revenues:

                 

External customers

  308,920      50,632      62,061   117,077      67,351   150,355   32,353           788,749   

Intersegment

  2,329           5,116   8      58     234      (7,745     
                                               
  311,249      50,632      67,177   117,085      67,409   150,355   32,587      (7,745   788,749   
                                               

Costs and Expenses:

                 

Operating

  160,448      28,563      37,248   77,629      47,733   141,036   19,918      (8,032   504,543   

Administrative and general

  21,133      2,126      4,184   9,800      13,207   5,307   4,833      18,150      78,740   

Depreciation and amortization

  27,491      15,998      9,816   17,776      3,493   2   3,925      591      79,092   
                                               
  209,072      46,687      51,248   105,205      64,433   146,345   28,676      10,709      662,375   
                                               

Gains (Losses) on Asset Dispositions and Impairments, Net

  14,807           2,657   (1,059   12     330      (2   16,745   
                                               

Operating Income (Loss)

  116,984      3,945      18,586   10,821      2,988   4,010   4,241      (18,456   143,119   
                                               

Other Income (Expense):

                 

Derivative gains (losses), net

  (18          313        1,537        5,544      7,376   

Foreign currency gains (losses), net

  1,844      (9     1,366      20   272   131      3,881      7,505   

Other, net

  168                    26   (53   48      189   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  5,771           1,874   (4   101   187   (911        7,018   
                                       

Segment Profit

  124,749      3,936      20,460   12,496      3,109   6,032   3,408       
                                       

Other Income (Expense) not included in Segment Profit

            (17,658

Less Equity Earnings included in Segment Profit

            (7,018
                     

Income Before Taxes and Equity Earnings

            140,531   
                     

Capital Expenditures

  29,182           6,814   37,610      2,448     91      907      77,052   
                                               

As of June 30, 2009

                 

Property and Equipment

  781,925      380,436      277,254   495,978      32,818   135   136,832      3,984      2,109,362   

Investments, at Equity, and Receivables from 50% or Less Owned Companies

  31,265           79,704   27,893      1,991     10,009           150,862   

Goodwill

  13,367           1,493   353      37,066     1,302           53,581   

Intangible Assets

  11,425      2,525      1,607        9,768     693           26,018   

Other current and long-term assets, excluding cash and near cash assets(1)

  184,056      12,730      21,752   69,414      43,154   56,059   25,392      34,960      447,517   
                                       

Segment Assets

  1,022,038      395,691      381,810   593,638      124,797   56,194   174,228       
                                       

Cash and near cash assets(1)

                  749,355   
                     

Total Assets

                  3,536,695   
                     

 

(1) Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

 

21


Table of Contents
    Offshore
Marine
Services
$’000
  Marine
Transportation
Services
$’000
    Inland
River
Services
$’000
    Aviation
Services
$’000
    Environmental
Services
$’000
    Commodity
Trading
$’000
    Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the three months ended June 30, 2008

                 

Operating Revenues:

                 

External customers

  170,418   28,764      32,698      63,795      37,945      55,419      19,928           408,967   

Intersegment

  796        624           39           105      (1,564     
                                                   
  171,214   28,764      33,322      63,795      37,984      55,419      20,033      (1,564   408,967   
                                                   

Costs and Expenses:

                 

Operating

  104,599   16,762      21,310      46,697      26,571      46,977      12,959      (1,571   274,304   

Administrative and general

  15,801   1,607      1,916      4,895      8,423      1,644      2,529      8,280      45,095   

Depreciation and amortization

  13,674   8,039      4,032      8,672      1,414           1,656      241      37,728   
                                                   
  134,074   26,408      27,258      60,264      36,408      48,621      17,144      6,950      357,127   
                                                   

Gains on Asset Dispositions and Impairments, Net

  14,352        1,472      3,208      84           158           19,274   
                                                   

Operating Income (Loss)

  51,492   2,356      7,536      6,739      1,660      6,798      3,047      (8,514   71,114   
                                                   

Other Income (Expense):

                 

Derivative gains (losses), net

              1,173           (102   10      (8,194   (7,113

Foreign currency gains (losses), net

  111   (3        (478   (10   2      (4   986      604   

Other, net

                        3      3      156      162   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  1,592        (462   61      214           (90        1,315   
                                           

Segment Profit

  53,195   2,353      7,074      7,495      1,864      6,701      2,966       
                                           

Other Income (Expense) not included in Segment Profit

  

            (8,870

Less Equity Earnings included in Segment Profit

  

            (1,315
                     

Income Before Taxes and Equity Earnings

  

            55,897   
                     
                 

 

22


Table of Contents
    Offshore
Marine
Services
$’000
    Marine
Transportation
Services
$’000
  Inland
River
Services
$’000
  Aviation
Services
$’000
    Environmental
Services
$’000
    Commodity
Trading
$’000
    Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the six months ended June 30, 2008

                 

Operating Revenues:

                 

External customers

  324,678      57,717   62,843   117,587      80,433      84,093      36,071           763,422   

Intersegment

  1,183        624        60           219      (2,086     
                                                 
  325,861      57,717   63,467   117,587      80,493      84,093      36,290      (2,086   763,422   
                                                 

Costs and Expenses:

                 

Operating

  198,869      32,981   38,036   86,568      57,169      73,734      24,068      (2,081   509,344   

Administrative and general

  28,605      3,045   4,039   9,524      14,132      2,371      4,502      17,882      84,100   

Depreciation and amortization

  27,799      16,019   7,996   16,461      2,859           3,923      471      75,528   
                                                 
  255,273      52,045   50,071   112,553      74,160      76,105      32,493      16,272      668,972   
                                                 

Gains on Asset Dispositions and Impairments, Net

  21,490      3,629   2,183   3,602      119           158      (1   31,180   
                                                 

Operating Income (Loss)

  92,078      9,301   15,579   8,636      6,452      7,988      3,955      (18,359   125,630   
                                                 

Other Income (Expense):

                 

Derivative gains, net

           1,352           (592   15      (1,421   (646

Foreign currency gains (losses), net

  (44   27     (509   (19   1      (11   3,769      3,214   

Other, net

           39           4      3      280      326   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  5,225        449   1      272           (53        5,894   
                                         

Segment Profit

  97,259      9,328   16,028   9,519      6,705      7,401      3,909       
                                         

Other Income (Expense) not included in Segment Profit

            (20,569

Less Equity Earnings included in Segment Profit

            (5,894
                     

Income Before Taxes and Equity Earnings

            107,955   
                     

Capital Expenditures

  58,453      6,712   27,684   112,683      6,474           20,863      224      233,093   
                                                 

As of June 30, 2008

                 

Property and Equipment

  835,270      412,048   252,742   410,957      33,551           139,453      3,835      2,087,856   

Investments, at Equity, and Receivables from 50% or Less Owned Companies

  23,198        72,532   8,259      1,576           10,136           115,701   

Goodwill

  21,421      177   1,493   352      35,541           4,117           63,101   

Intangible Assets

  13,922      2,905   2,107        8,346           799           28,079   

Other current and long-term assets, excluding cash and near cash assets(1)

  168,845      12,538   30,593   86,402      54,283      11,540      27,937      38,162      430,300   
                                         

Segment Assets

  1,062,656      427,668   359,467   505,970      133,297      11,540      182,442       
                                         

Cash and near cash assets(1)

                  820,918   
                     

Total Assets

                  3,545,955   
                     
                 

 

(1) Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

 

23


Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the unprecedented decline in valuations in the global financial markets and illiquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, loss of U.S. coastwise endorsement for the retro-fitted double-hull tankers, Seabulk Trader and Seabulk Challenge, if the Company is unsuccessful in defending litigation seeking the revocation of their coastwise charters, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Offshore Marine Services, Marine Transportation Services and Aviation Services, decreased demand for Marine Transportation Services and Harbor and Offshore Towing Services due to construction of additional refined petroleum products, natural gas or crude oil pipelines or due to decreased demand for refined petroleum products, crude oil or chemical products or a change in existing methods of delivery, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations, the dependence of Offshore Marine Services, Marine Transportation Services and Aviation Services on several customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels and aircraft, industry fleet capacity, restrictions imposed by the Shipping Acts and Aviation Acts on the amount of foreign ownership of the Company’s Common Stock, increased competition if the Jones Act is repealed, operational risks of Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services, effects of adverse weather conditions and seasonality, future phase-out of Marine Transportation Services’ double-bottom tanker, dependence of spill response revenue on the number and size of spills and upon continuing government regulation in this area and Environmental Services’ ability to comply with such regulation and other governmental regulation, changes in National Response Corporation’s Oil Spill Removal Organization classification, liability in connection with providing spill response services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.

Results of Operations

The Company’s operations are divided into six main business segments – Offshore Marine Services, Marine Transportation Services, Inland River Services, Aviation Services, Environmental Services and Commodity Trading. The Company also has activities that are referred to and described under Other, which primarily includes Harbor and Offshore Towing Services, various other investments in joint ventures and lending and leasing activities.

 

24


Table of Contents

The sections below provide an analysis of the Company’s operations by business segment for the three months (“Current Year Quarter”) and six months (“Current Six Months”) ended June 30, 2009, as compared with the three months (“Prior Year Quarter”) and six months (“Prior Six Months”) ended June 30, 2008. See “Item 1. Financial Statements – Note 15. Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘09/’08
 
     2009    2008    2009    2008    3 Mos     6 Mos  
     $’000     %    $’000    %    $’000     %    $’000     %    %     %  

Operating Revenues:

                         

United States

   52,373      36    79,439    46    128,222      41    149,469      46     
                                               

Africa, primarily West Africa

   29,215      20    30,479    18    58,278      19    62,799      19     

Middle East

   22,097      15    21,917    13    43,443      14    38,411      12     

Mexico, Central and South America

   18,220      12    13,665    8    34,545      11    23,838      7     

United Kingdom, primarily North Sea

   16,552      11    19,180    11    31,712      10    38,343      12     

Asia

   8,009      6    6,534    4    15,049      5    13,001      4     
                                               

Total Foreign

   94,093      64    91,775    54    183,027      59    176,392      54     
                                               
   146,466      100    171,214    100    311,249      100    325,861      100    (14   (4
                                               

Costs and Expenses:

                         

Operating

   81,609      56    104,599    61    160,448      52    198,869      61     

Administrative and general

   10,935      7    15,801    9    21,133      7    28,605      9     

Depreciation and amortization

   13,802      9    13,674    8    27,491      9    27,799      9     
                                               
   106,346      72    134,074    78    209,072      68    255,273      79     
                                               

Gains on Asset Dispositions and Impairmaints, net

   361         14,352    8    14,807      5    21,490      7     
                                               

Operating Income

   40,481      28    51,492    30    116,984      37    92,078      28    (21   27   
                                               

Other Income (Expense):

                         

Derivative losses, net

   (18            (18               

Foreign currency gains (losses), net

   479         111       1,844      1    (44       

Other, net

   (4            168                  

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

   3,380      2    1,592    1    5,771      2    5,225      2     
                                               

Segment Profit

   44,318      30    53,195    31    124,749      40    97,259      30    (17   28   
                                               

 

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Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues decreased by $24.7 million in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues decreased by $32.1 million and other operating revenues, including third party brokered vessel activity, bareboat charter revenues and other marine services, increased by $7.4 million.

The decrease in time charter revenues was primarily due to a 2,141 or 13% reduction in days available for charter due to net fleet dispositions. Overall fleet utilization fell to 75% in the Current Year Quarter compared with 81% in the Prior Year Quarter primarily due to increased downtime resulting from cold-stacking vessels in the U.S. Gulf of Mexico. As of June 30, 2009, 23 vessels were cold-stacked. Overall average day rates were $12,030 per day in the Current Year Quarter compared with $12,182 per day in the Prior Year Quarter, a reduction of $152 per day or 1%. In overall terms, the decrease in average day rates reduced time charter revenues by $3.6 million and the impact of unfavorable changes in currency exchange rates reduced time charter revenues by a further $4.3 million. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and changes in utilization and other changes in fleet mix combined to reduce time charter revenues by $24.2 million.

In the U.S. Gulf of Mexico, time charter revenues were $27.6 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to a 20% reduction in utilization. Average day rates decreased from $13,198 per day in the Prior Year Quarter to $13,064 per day in the Current Year Quarter.

Time charter revenues were higher in Mexico, Central and South America primarily due to higher utilization levels as a consequence of reduced downtime for maintenance, conversion and mobilization, and higher in Asia primarily due to mobilizing vessels from other geographic regions. Time charter revenues in West Africa were lower primarily due to net fleet dispositions and mobilizing vessels to other geographic regions and lower in the North Sea where average rates declined due to unfavorable currency exchange rate movements between the U.S. dollar and the pound sterling.

Operating Revenues – Current Six Months compared with Prior Six Months. Operating revenues decreased by $14.6 million in the Current Six Months compared with the Prior Six Months. Time charter revenues decreased by $32.2 million and other operating revenues, including third party brokered vessel activity, bareboat charter revenues and other marine services, increased by $17.6 million.

The decrease in time charter revenues was primarily due to a 4,200 or 13% reduction in days available for charter due to net fleet dispositions. Overall fleet utilization was 78% in the Current Six Months compared with 79% in the Prior Six Months. Overall average day rates were $12,421 per day in the Current Six Months compared with $11,987 per day in the Prior Six Months, an increase of $434 per day or 4%. In overall terms, the improvement in average day rates increased time charter revenues by $7.2 million and the impact of unfavorable changes in currency exchange rates reduced time charter revenues by $9.7 million. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and changes in utilization and other changes in fleet mix combined to reduce time charter revenues by $29.7 million.

In the U.S. Gulf of Mexico, time charter revenues were $22.8 million lower in the Current Six Months compared with the Prior Six Months primarily due to an 8% reduction in utilization and a decrease in average day rates from $14,495 per day to $12,922 per day.

Time charter revenues were higher in Mexico, Central and South America, primarily due to higher utilization levels as a consequence of reduced downtime for maintenance, conversion and mobilization, higher in the Middle East primarily due to improvements in average day rates and higher in Asia primarily due to mobilizing vessels from other geographic regions. Time charter revenues in West Africa were lower primarily due to net fleet dispositions and mobilizing vessels to other geographic regions and lower in the North Sea where average day rates declined due to unfavorable currency exchange rate movements between the U.S. dollar and the pound sterling.

 

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Operating Income – Current Year Quarter compared with Prior Year Quarter. Operating income in the Current Year Quarter included $0.4 million of gains on asset dispositions compared with $14.4 million of gains in the Prior Year Quarter. Excluding the impact of these gains, operating income increased by $3.0 million. The decrease in operating revenues noted above was partially offset by a $23.0 million reduction in operating expenses primarily due to net fleet dispositions, a reduction in the number of scheduled drydockings, lower unscheduled repair costs and cold-stacking additional vessels in the U.S. Gulf of Mexico. Administrative and general expenses were $4.9 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to the impact of restructuring the international group in late 2008.

Operating Income – Current Six Months compared with Prior Six Months. Operating income in the Current Six Months included $14.8 million of gains on asset dispositions compared with $21.5 million of gains in the Prior Six Months. Excluding the impact of these gains, operating income increased by $31.6 million. The decrease in operating revenues noted above was partially offset by a $38.4 million reduction in operating expenses primarily due to net fleet dispositions, a reduction in the number of scheduled drydockings and cold-stacking additional vessels in the U.S. Gulf of Mexico. Administrative and general expenses were $7.5 million lower in the Current Six Months compared with the Prior Six Months primarily due to the impact of restructuring the international group in late 2008.

Equity in Earnings of 50% or Less Owned Companies. Equity earnings increased by $1.8 million in the Current Year Quarter compared with the Prior Year Quarter and by $0.5 million in the Current Six Months compared with the Prior Six Months. The Current Year Quarter increase is primarily due to an Argentinian joint venture that began operations during July 2008. In February 2008, Offshore Marine Services recognized a gain of $1.9 million, net of tax, relating to the sale of a vessel owned by its Norwegian joint venture.

Fleet Count. The composition of Offshore Marine Services’ fleet as of June 30 was as follows:

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2009

              

Anchor handling towing supply

   18    1    1    1    21

Crew

   42    2    23    1    68

Mini-supply

   7       5       12

Standby safety

   24             24

Supply

   12       8    8    28

Towing supply

   7    3    2    1    13

Specialty

   6    3          9
                        
   116    9    39    11    175
                        

2008

              

Anchor handling towing supply

   17    1    1    1    20

Crew

   51    2    23       76

Mini-supply

   14       5    1    20

Standby safety

   23    1       5    29

Supply

   14       9    5    28

Towing supply

   10    3    2    1    16

Specialty

   10    3          13
                        
   139    10    40    13    202
                        

 

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Operating Data. The table below sets forth the average rates per day worked, utilization and available days data for each group of Offshore Marine Services’ vessels operating under time charters for the periods indicated. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total calendar days available for work. Available days represents the total calendar days during which owned and chartered-in vessels are operated by the Company.

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
 
     2009     2008     2009     2008  

Rates Per Day Worked:

        

Anchor handling towing supply

   $ 36,486      $ 41,038      $ 42,288      $ 36,330   

Crew

     7,592        6,608        7,443        6,673   

Mini-supply

     6,286        6,838        6,021        6,950   

Standby safety

     8,522        10,278        8,137        10,212   

Supply

     14,716        16,250        15,534        15,898   

Towing supply

     11,973        10,532        11,779        10,389   

Specialty

     15,742        11,962        14,426        11,873   

Overall Average Rates Per Day Worked

     12,030        12,182        12,421        11,987   

Utilization:

        

Anchor handling towing supply

     66     69     70     76

Crew

     71     77     75     73

Mini-supply

     61     67     67     64

Standby safety

     88     88     89     89

Supply

     79     90     80     89

Towing supply

     98     94     94     87

Specialty

     82     94     91     92

Overall Fleet Utilization

     75     81     78     79

Available Days:

        

Anchor handling towing supply

     1,547        1,618        3,053        3,165   

Crew

     5,973        6,492        12,096        13,044   

Mini-supply

     1,319        1,795        2,697        3,615   

Standby safety

     2,184        2,093        4,344        4,186   

Supply

     1,820        2,123        3,620        4,222   

Towing supply

     819        1,253        1,690        2,553   

Specialty

     402        831        852        1,767   
                                

Overall Fleet Available Days

     14,064        16,205        28,352        32,552   
                                
        

 

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Table of Contents

Marine Transportation Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘09/’08
 
     2009    2008    2009    2008    3 Mos     6 Mos  
     $’000    %    $’000     %    $’000     %    $’000    %    %     %  

Operating Revenues:

                          

United States

   24,095    100    28,764      100    50,632      100    57,717    100    (16   (12
                                              

Costs and Expenses:

                          

Operating

   11,792    49    16,762      58    28,563      56    32,981    57     

Administrative and general

   942    4    1,607      6    2,126      4    3,045    5     

Depreciation and amortization

   7,999    33    8,039      28    15,998      32    16,019    28     
                                              
   20,733    86    26,408      92    46,687      92    52,045    90     
                                              

Gains on Asset Dispositions

                         3,629    6     
                                              

Operating Income

   3,362    14    2,356      8    3,945      8    9,301    16    43      (58
                                              

Other Income (Expense):

                          

Foreign currency gains (losses), net

   25       (3      (9      27        
                                              

Segment Profit

   3,387    14    2,353      8    3,936      8    9,328    16    44      (58
                                              

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues were $4.7 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to changes in the contract status of the California Voyager from time charter to long-term bareboat charter commencing in September 2008, the Seabulk Challenge, which began a new time charter in April 2009, and the Seabulk Energy, which completed a long-term time charter in February 2009 and operated in the spot market in the Current Year Quarter. Operating revenues were higher in the Current Year Quarter for the Seabulk Arctic, which began a regulatory drydocking in the Prior Year Quarter.

Operating Revenues – Current Six Months compared with Prior Six Months. Operating revenues were $7.1 million lower in the Current Six Months compared with the Prior Six Months primarily due to changes in the contract status of the California Voyager and the Seabulk Energy as noted above. In addition, the Seabulk Energy was off-hire for regulatory drydocking and repairs for 28 days in the Current Six Months. Operating revenues were higher in the Current Six Months for the Seabulk Arctic and Seabulk Challenge, both of which were off-hire while undergoing regulatory drydockings in the Prior Six Months, and for the Seabulk Pride which was off-hire for repairs in the Prior Six Months.

Operating Income – Current Year Quarter compared with Prior Year Quarter. Operating income was $1.0 million higher in the Current Year Quarter compared with the Prior Year Quarter. The reductions in operating revenues noted above were offset by lower operating expenses primarily due to changes in the contract status of the California Voyager and the Seabulk Challenge and lower voyage costs for the Seabulk America, which operated in the spot market. In addition, operating expenses were lower in the Current Year Quarter for the Seabulk Arctic which began a regulatory drydocking in the Prior Year Quarter.

Operating Income – Current Six Months compared with Prior Six Months. Operating income in the Prior Six Months included gains of $3.6 million on the sale of the Seabulk Magnachem and Seabulk Power. Excluding the impact of these gains, operating income was $1.7 million lower in the Current Six Months compared with the Prior Six Months. Operating income was lower for the Seabulk Energy due to the reduced operating revenues noted above and higher operating expenses, primarily due to its regulatory drydocking in the Current Six Months.

 

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Table of Contents

Operating income was lower for the California Voyager following its change in contract status from time charter to long-term bareboat charter. Operating income was higher for the Seabulk Challenge primarily due to its new time charter and higher for the Seabulk America which operated in the spot market, primarily due to lower voyage costs. Operating income was higher for the Seabulk Pride primarily due to the improved operating revenues noted above and for the Seabulk Arctic due to improved operating revenues and lower operating expenses primarily due to its regulatory drydocking in the Prior Six Months.

Fleet Count. As of June 30, 2009 and 2008, Marine Transportation Services owned eight U.S.-flag product tankers operating in the domestic coastwise trade.

Inland River Services

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
   Change
‘09/’08
     2009    2008     2009    2008    3 Mos     6 Mos
     $’000    %    $’000     %     $’000    %    $’000    %    %     %

Operating Revenues:

                          

United States

   30,163    100    33,322      100      67,177    100    63,467    100    (10   6
                                              

Costs and Expenses:

                          

Operating

   17,839    59    21,310      64      37,248    55    38,036    60     

Administrative and general

   2,048    7    1,916      6      4,184    6    4,039    6     

Depreciation and amortization

   4,950    16    4,032      12      9,816    15    7,996    13     
                                              
   24,837    82    27,258      82      51,248    76    50,071    79     
                                              

Gains on Asset Dispositions

   396    1    1,472      4      2,657    4    2,183    3     
                                              

Operating Income

   5,722    19    7,536      22      18,586    28    15,579    24    (24   19
                                              

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

   702    2    (462   (1   1,874    2    449    1     
                                              

Segment Profit

   6,424    21    7,074      21      20,460    30    16,028    25    (9   28
                                              
                          

Operating Revenues. Operating revenues decreased by $3.2 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $3.7 million in the Current Six Months compared with the Prior Six Months. In the Current Year Quarter and Current Six Months operating revenues were higher in the liquid unit tow operation primarily due to the addition of two towboats and eight 30,000-barrel liquid tank barges. In addition, operating revenues were higher due to the commencement of terminal operations in Sauget, Illinois in May 2008. These increases were offset by declines in operating revenues from non-grain freight loadings and idling of a portion of the pooled fleet in the Current Year Quarter. Loadings in the Current Year Quarter were significantly lower than in the Prior Year Quarter due to weaker demand for the movement of non-grain commodities, including construction related materials and domestic coal.

Operating Income. Operating income in the Current Year Quarter included $0.4 million of gains on asset dispositions compared with $1.5 million in the Prior Year Quarter and $2.7 million of gains on asset dispositions in the Current Six Months compared with $2.2 million in the Prior Year Six Months. Excluding the impact of these gains, operating income decreased by $0.7 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $2.5 million in the Current Six Months compared with the Prior Six Months. The changes in operating income were generally in line with the changes in operating revenues noted above. Operating results in the pooled fleet benefited from favorable operating conditions and lower fuel prices, which resulted in lower towing, fleeting and switching costs compared with the Prior Year Quarter and Prior Six Months.

 

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Fleet Count. The composition of Inland River Services’ fleet as of June 30 was as follows:

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2009

              

Inland river dry cargo barges-open

   209    124          333

Inland river dry cargo barges-covered

   373    138    2    113    626

Inland river liquid tank barges

   51    34    2       87

Inland river deck barges

   26             26

Inland river towboats

   18    5          23

Dry-cargo vessel(1)

      1          1
                        
   677    302    4    113    1,096
                        

2008

              

Inland river dry cargo barges-open

   213    97    5    3    318

Inland river dry cargo barges-covered

   409    131    2    123    665

Inland river liquid tank barges

   44    29    2       75

Inland river deck barges

   26             26

Inland river towboats

   16    4          20
                        
   708    261    9    126    1,104
                        
              

 

(1) Argentine-flag.

Aviation Services

 

    For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
  Change
‘09/’08
    2009     2008     2009     2008   3 Mos     6 Mos
    $’000     %     $’000     %     $’000     %     $’000     %   %     %

Operating Revenues:

                   

United States

  50,689      88      56,630      89      102,202      87      106,142      90    

Foreign

  7,011      12      7,165      11      14,883      13      11,445      10    
                                                 
  57,700      100      63,795      100      117,085      100      117,587      100   (10   0
                                                 

Costs and Expenses:

                   

Operating

  37,312      65      46,697      73      77,629      66      86,568      74    

Administrative and general

  5,649      9      4,895      8      9,800      8      9,524      8    

Depreciation and amortization

  9,070      16      8,672      13      17,776      15      16,461      14    
                                                 
  52,031      90      60,264      94      105,205      89      112,553      96    
                                                 

Gains (Losses) on Asset Dispositions and Impairments, Net

  (1,104   (2   3,208      5      (1,059   (1   3,602      3    
                                                 

Operating Income

  4,565      8      6,739      11      10,821      10      8,636      7   (32   25
                                                 

Other Income (Expense):

                   

Derivative gains (losses), net

  (78        1,173      2      313           1,352      1    

Foreign currency gains (losses), net

  937      2      (478   (1   1,366      1      (509      

Other, net

                                39         

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

  270           61           (4        1         
                                                 

Segment Profit

  5,694      10      7,495      12      12,496      11      9,519      8   (24   31
                                                 
                   

 

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Table of Contents

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues decreased by $6.1 million in the Current Year Quarter compared with the Prior Year Quarter. Operating revenues in the U.S. Gulf of Mexico decreased due to the loss of several short-term contracts and a cost-driven reduction in fuel sales prices. Operating revenues in Alaska also decreased due to a reduction in fuel sales volume and prices at the fixed-base operation as well as fewer aircraft supporting seasonal flightseeing operations. These reductions were partially offset by additional oil and gas support contracts in Alaska. In addition, air medical services’ operating revenues were higher due to an increase in patient transports.

Operating Revenues – Current Six Months compared with Prior Year Six Months. Operating revenues decreased by $0.5 million in the Current Six Months compared to the Prior Six Months. Operating revenues in Alaska were significantly reduced primarily due to lower fuel sales volume and prices at the fixed base operation. Operating revenues in the U.S. Gulf of Mexico were slightly higher due to additional contracts and generally better rates with new equipment, partially offset by lower re-billable fuel revenues as a result of the decline in fuel prices. Operating revenues in air medical services were higher due to an increase in patient transports and international leasing revenues were higher as additional helicopters were placed on long-term leases and short-term contracts outside the United States.

Operating Income. Operating income in the Current Year Quarter and the Current Six Months included $1.1 million of losses on net asset dispositions and impairments, compared with gains of $3.2 million and $3.6 million in the Prior Year Quarter and Prior Six Months, respectively. Excluding the impact of these transactions, operating income increased by $2.1 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $6.3 million in the Current Six Months compared with the Prior Six Months. Operating income was impacted by the decreases in operating activities noted above, lower fuel costs and the receipt of insurance proceeds in the Current Year Quarter related to damage incurred from Hurricanes Gustav and Ike. Operating income in the Current Six Months was impacted by the recovery of a previously reserved receivable balance from a major Alaska-based customer.

Fleet Count. The composition of Aviation Services’ fleet as of June 30 was as follows:

 

     Owned(1)    Joint
Ventured
   Leased-in(2)    Managed    Total

2009

              

Light helicopters – single engine

   51    6    3       60

Light helicopters – twin engine

   35       6    9    50

Medium helicopters

   52       3    6    61

Heavy helicopters

   7       1       8
                        
   145    6    13    15    179
                        

2008

              

Light helicopters – single engine

   50    6    6       62

Light helicopters – twin engine

   31       7    17    55

Medium helicopters

   47       3    7    57

Heavy helicopters

   5             5
                        
   133    6    16    24    179
                        

 

(1) Excludes one and four helicopter(s) removed from service as of June 30, 2009 and 2008, respectively.

 

(2) Excludes three helicopters removed from service as of June 30, 2009.

 

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Table of Contents

Environmental Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘09/’08
 
     2009    2008    2009    2008    3 Mos     6 Mos  
     $’000    %    $’000     %    $’000    %    $’000     %    %     %  

Operating Revenues:

                          

United States

   28,378    86    27,331      72    57,251    85    61,880      77     

Foreign

   4,797    14    10,653      28    10,158    15    18,613      23     
                                              
   33,175    100    37,984      100    67,409    100    80,493      100    (13   (16
                                              

Costs and Expenses:

                          

Operating

   23,656    71    26,571      70    47,733    71    57,169      71     

Administrative and general

   5,966    18    8,423      22    13,207    20    14,132      18     

Depreciation and amortization

   1,739    5    1,414      4    3,493    5    2,859      3     
                                              
   31,361    94    36,408      96    64,433    96    74,160      92     
                                              

Gains on Asset Dispositions

   4       84         12       119          
                                              

Operating Income

   1,818    6    1,660      4    2,988    4    6,452      8    10      (54
                                              

Other Income (Expense):

                          

Foreign currency gains (losses), net

   53       (10      20       (19       

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

   15       214      1    101       272          
                                              

Segment Profit

   1,886    6    1,864      5    3,109    4    6,705      8    1      (54
                                              
                          

Operating Revenues. Operating revenues decreased by $4.8 million in the Current Year Quarter compared with the Prior Year Quarter and by $13.1 million in the Current Six Months compared to the Prior Six Months. The decreases were primarily due to the impact of operating revenues contributed from pipeline repair projects in the Republic of Georgia and Turkey in the Prior Year Quarter and the Prior Six Months. In addition, operating revenues were lower in the Current Six Months due to a reduction of industrial services activity primarily on the U.S. West Coast. Operating revenues from consulting services were lower in both periods primarily due to a decrease in platform recovery, planning and public assistance recovery services. Operating revenues from response services were higher in both periods primarily due to an increase in debris monitoring activity in Kentucky and Arkansas and additional work in Louisiana relating to Hurricane Gustav.

Operating Income. Operating income increased by $0.2 million in the Current Year Quarter compared with the Prior Year Quarter and decreased by $3.5 million in the Current Six Months compared with the Prior Six Months. Operating income in both periods was impacted by the changes in operating revenues noted above. Administrative and general expenses were lower in the Current Year Quarter primarily due to reductions in management bonus awards.

 

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Table of Contents

Commodity Trading

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘09/’08
 
     2009    2008    2009    2008    3 Mos     6 Mos  
     $’000    %    $’000     %    $’000    %    $’000     %    %     %  

Operating Revenues:

                          

United States

   52,502    61    30,390      55    101,990    68    57,774      69     

Foreign

   33,350    39    25,029      45    48,365    32    26,319      31     
                                              
   85,852    100    55,419      100    150,355    100    84,093      100    55      79   
                                              

Costs and Expenses:

                          

Operating

   79,165    92    46,977      85    141,036    94    73,734      88     

Administrative and general

   3,468    4    1,644      3    5,307    3    2,371      3     

Depreciation

   2               2                
                                              
   82,635    96    48,621      88    146,345    97    76,105      91     
                                              

Operating Income

   3,217    4    6,798      12    4,010    3    7,988      9    (53   (50
                                              

Other Income (Expense):

                          

Derivative gains (losses), net

   588    1    (102      1,537    1    (592       

Foreign currency gains, net

   289       2         272       1          

Other, net

   26       3         26       4          

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

   32               187                
                                              

Segment Profit

   4,152    5    6,701      12    6,032    4    7,401      9    (38   (18
                                              

Segment Profit. Segment profit decreased by $2.5 million in the Current Year Quarter compared with the Prior Year Quarter and by $1.4 million in the Current Six Months compared with the Prior Six Months due to decreased rice merchandising activity, partially offset by higher renewable fuel merchandising activity.

Other Segment Profit

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘09/’08
 
     2009     2008     2009     2008     3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Harbor and Offshore Towing Services

   3,284      3,089      4,954      4,199      6      18   

Other Activities

   (379   (33   (635   (237   (1,048   (168

Equity in Losses of 50% or Less Owned Companies

   (908   (90   (911   (53   (909   (1,619
                            

Segment Profit

   1,997      2,966      3,408      3,909      (33   (13
                            

Harbor and Offshore Towing Services. Segment profit increased $0.2 million in the Current Year Quarter compared with the Prior Year Quarter and by $0.8 million in the Current Six Months compared with the Prior Six Months primarily due to improved results from its terminal operations in St. Eustatius and lower drydocking and fuel costs, partially offset by decreased harbor traffic.

 

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Equity in Losses of 50% or Less Owned Companies. During the Current Year Quarter, the Company recorded a $0.7 million impairment charge, net of tax, related to one of its cost investments.

Corporate and Eliminations

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘09/’08
 
     2009     2008     2009     2008     3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Corporate Expenses

   (8,741   (8,555   (18,763   (18,406   (2   (2

Eliminations

        41      307      47           553   
                            

Operating Loss

   (8,741   (8,514   (18,456   (18,539   (2     
                            

Other Income (Expense):

            

Derivative gains (losses), net

   3,273      (8,194   5,544      (1,421   140      490   

Foreign currency gains, net

   4,936      986      3,881      3,769      401      3   

Other, net

   (23   156      48      280      (115   (83

Derivative gains (losses), net. Derivative gains, net were $3.3 million in the Current Year Quarter and $5.5 million in the Current Six Months compared with derivative losses, net of $8.2 million in the Prior Year Quarter and $1.4 million in the Prior Six Months primarily due to improved results on forward currency exchange contracts, equity index and options and commodity swap, option and future contracts.

Foreign currency gains, net. Foreign currency gains, net were $4.9 million in the Current Year Quarter primarily due to a weakening of the U.S. dollar against foreign currencies underlying certain of the Company’s cash positions and intercompany notes receivable.

Other Income (Expense) not included in Segment Profit

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘09/’08
 
     2009     2008     2009     2008     3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Interest income

   578      5,373      1,621      12,849      (89   (87

Interest expense

   (14,075   (14,625   (28,412   (28,116   (4   1   

Debt extinguishment gains (losses), net

   (78   (1   1,285      (1   (77   1,286   

Marketable security gains (losses), net

   11,829      383      7,848      (5,301   2,989      248   
                            
   (1,746   (8,870   (17,658   (20,569   80      14   
                            

Interest Income. Interest income decreased in the Current Year Quarter compared with the Prior Year Quarter and in the Current Six Months compared with the Prior Six Months primarily due to lower rates of return.

Interest Expense. Interest expense decreased in the Current Year Quarter compared with the Prior Year Quarter primarily due to the purchase of $45.1 million in principal amount of certain of the Company’s Senior Notes and Convertible Debentures partially offset by lower capitalized interest. Interest expense increased in the Current Six Months compared with the Prior Six Months primarily due to lower capitalized interest partially offset by a lower overall interest rate. The impact of adopting FSP APB 14-1 was an additional $2.0 million and

 

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$1.9 million of pre tax, non-cash interest expense in the Current Year Quarter and Prior Year Quarter, respectively, and an additional $4.0 million and $3.7 million of pre-tax, non-cash interest expense in the Current Six Months and Prior Six Months, respectively.

Debt extinguishment gains (losses), net. Debt extinguishment losses, net in the Current Year Quarter resulted from the Company’s purchase of $1.8 million in principal amount of its 2.875% Convertible Debentures due 2024, $37.0 million in principal amount of its 7.2% Senior Notes due 2009 and $6.3 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $45.6 million at average prices above their respective principal amounts, partially offset by the recognition of unamortized net premiums. Debt extinguishment gains, net in the Current Six Months resulted from the Company’s purchase of $3.8 million in principal amount of its 2.875% Convertible Debentures due 2024, $1.0 million in principal amount of its 5.875% Senior Notes due 2012, $37.0 million in principal amount of its 7.2% Senior Notes due 2009 and $20.2 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $62.1 million at average prices below their respective principal amounts and the recognition of unamortized net premiums.

Marketable security gains (losses), net. Marketable security gains, net in the Current Year Quarter and the Current Six Months primarily resulted from gains on long marketable security positions. Marketable security losses, net in the Prior Six Months resulted from losses on short sales of marketable securities partially offset by gains on long marketable security positions.

Liquidity and Capital Resources

General

The Company’s ongoing liquidity requirements arise primarily from working capital needs, meeting its capital commitments and the repayment of debt obligations. In addition, the Company may use its liquidity to fund acquisitions, repurchase shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), for treasury or to make other investments. Sources of liquidity are cash balances, marketable securities, construction reserve funds, Title XI reserve funds, cash flows from operations and borrowings under the Company’s revolving credit facility. From time to time, the Company may secure additional liquidity through the issuance of debt, shares of Common Stock, preferred stock or a combination thereof.

Summary of Cash Flows

 

     For the Six Months
Ended June 30,
 
     2009     2008  
     $’000     $’000  

Cash flows provided by or (used in):

    

Operating Activities

   188,629      135,802   

Investing Activities

   10,336      (113,129

Financing Activities

   (67,289   (139,767

Effect of Exchange Rate Changes on Cash and Cash Equivalents

   8,508      2,358   
            

Net Increase (Decrease) in Cash and Cash Equivalents

   140,184      (114,736
            

Operating Activities

Cash flows provided by operating activities were $188.6 million in the Current Six Months compared with $135.8 million in the Prior Six Months. Cash flows from operating activities increased primarily due to improved net income before depreciation and gains on asset dispositions and net proceeds received on marketable security transactions designated as trading in the Current Six Months.

 

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Effective October 1, 2008, the Company designated its investments in marketable equity and debt securities as trading securities from their previous available-for-sale designation. As a result, cash flows from trading securities are now reported within operating activities. Prior to this change in designation, cash flows relating to available-for-sale securities were reported within investing activities. During the Current Six Months, cash used in operating activities included $10.9 million to purchase marketable security long positions and $1.0 million to cover marketable security short positions. During the Current Six Months, cash provided by operating activities included $26.7 million received from the sale of marketable security long positions and $1.8 million received upon entering into marketable security short positions.

Investing Activities

Cash flows provided by investing activities were $10.3 million in the Current Six Months compared with cash flows used in investing activities of $113.1 million in the Prior Six Months.

During the Prior Six Months, cash used in investing activities included $126.2 million to purchase marketable security long positions and $33.6 million to cover marketable security short positions. During the Prior Six Months, cash provided by investing activities included $57.5 million received from the sale of marketable security long positions and $26.3 million received upon entering into marketable security short positions.

During the Current Six Months, capital expenditures were $77.1 million. Equipment deliveries during the Current Six Months included two offshore support vessels, one inland river towboat and four helicopters. During the Prior Six Months, capital expenditures were $233.1 million. Equipment deliveries during the Prior Six Months included six offshore support vessels, 15 inland river dry cargo barges, three inland river towboats, twelve helicopters, two ocean liquid tank barges and three harbor tugs.

During the Current Six Months, the Company sold 14 offshore support vessels, four inland river dry cargo barges, three harbor tugs and other equipment. In addition, two helicopters were scrapped and one helicopter was declared a total loss after an accident in the North Sea. The Company received $55.5 million on the disposition of these assets, including the insurance proceeds for the helicopter, and recognized net gains of $16.7 million. During the Prior Six Months, the Company sold eight offshore support vessels, two tankers, one inland river dry cargo barge, five inland river liquid tank barges, six helicopters, one harbor tug, one offshore marine construction contract and other equipment for an aggregate consideration of $63.8 million and recognized net gains of $31.2 million.

As of June 30, 2009, construction reserve funds of $249.0 million are classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment. During the Current Six Months, construction reserve fund account transactions included withdrawals of $58.3 million and deposits of $19.4 million. During the Prior Six Months, construction reserve fund account transactions included withdrawals of $171.1 million and deposits of $36.3 million.

The Company’s unfunded capital commitments as of June 30, 2009 consisted primarily of offshore support vessels, helicopters, ocean liquid tank barges and inland river towboats and totaled $117.4 million, of which $48.1 million is payable during the remainder of 2009 and the balance is payable through 2011. Of the total unfunded capital commitments, $20.9 million may be terminated without further liability other than the payment of liquidated damages of $3.0 million in the aggregate. Subsequent to June 30, 2009, the Company committed to purchase additional equipment for $3.7 million, of which $1.1 million is payable during the remainder of 2009 and the balance is payable through 2011.

 

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Financing Activities

Cash flows used in financing activities were $67.3 million in the Current Six Months compared with $139.8 million in the Prior Six Months.

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire Common Stock and its 2.875% Convertible Debentures due 2024. During the Current Six Months, the Company repurchased $3.8 million in principal amount of its 2.875% Convertible Debentures due 2024 for $3.7 million. During the Prior Six Months, the Company acquired for treasury 1,658,317 shares of Common Stock for an aggregate purchase price of $142.7 million. As of June 30, 2009, the remaining authority under the repurchase plan was $145.5 million.

Additionally, the Company may purchase, separate from such authorization noted above, any or all of its 7.2% Senior Notes due 2009, its 5.875% Senior Notes due 2012 and its 9.5% Senior Notes due 2013. During the Current Six Months, the Company purchased $1.0 million in principal amount of its 5.875% Senior Notes due 2012, $37.0 million in principal amount of its 7.2% Senior Notes due 2009 and $20.2 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $58.4 million.

During the Current Six Months, the Company made principal payments on long-term debt and capital lease obligations of $29.4 million excluding debt purchases. During the Prior Six Months, the Company made principal payments on long-term debt and capital lease obligations of $8.7 million.

During the Current Six Months, the Company drew $25.0 million under its revolving credit facility. The remaining availability under this facility was $322.9 million, net of issued letters of credit of $2.1 million. In addition, the Company had other outstanding letters of credit totaling $46.7 million with various expiration dates through 2012.

Short and Long-Term Liquidity Requirements

The recent economic conditions have created an unprecedented disruption in the credit and capital markets. To date, the Company’s liquidity has not been materially impacted and management does not expect that it will be materially impacted in the near future. The Company anticipates it will continue to generate positive cash flows from operations and that these cash flows will be adequate to meet the Company’s working capital requirements. In support of the Company’s capital expenditure program or other liquidity requirements, the Company may use its cash balances, sell securities, utilize construction reserve funds, sell additional vessels or other equipment, enter into sale and leaseback transactions for equipment, borrow under its revolving credit facility, issue debt or a combination thereof.

The outstanding principal balance of the Company’s 7.2% Senior Notes is due in September 2009. The Company expects to refinance the remaining principal balance of this debt through drawdowns under its revolving credit facility.

The Company’s long-term liquidity is dependent upon its ability to generate operating profits sufficient to meet its requirements for working capital, capital expenditures and a reasonable return on shareholders’ investment. The Company believes that earning such operating profits will permit it to maintain its access to favorably priced debt, equity or off-balance sheet financing arrangements. Management will continue to closely monitor the Company’s liquidity and the credit and capital markets.

 

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Contingencies

In the normal course of its business, the Company becomes involved in various litigation matters including, among other things, claims by third parties for alleged property damages, personal injuries and other matters. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto as appropriate. It is possible that a change in the Company’s estimates related to these exposures could occur, but the Company does not expect such changes in estimated costs will have a material effect on the Company’s consolidated financial position or its results of operations.

Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran. Relating to these prohibitions, Seabulk International, Inc. (“Seabulk”), a subsidiary of SEACOR acquired in July 2005, filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury in December 1999 and January and May 2002. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three Seabulk vessels that called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels that called in Iran in 1998. In March 2003, Seabulk received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against Seabulk or certain individuals who knowingly participated in such activity. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its consolidated financial position or its results of operations.

During 2006 and 2007, Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, or Jones Act, trade which is restricted to vessels built or rebuilt in the United States. In May 2005, MTS received a determination from the U.S. Coast Guard (“USCG”), which administers the United States build requirements of the Jones Act, concluding the retro-fit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS completed the retrofit work in the foreign shipyard in reliance upon the USCG’s determination, which MTS believes was correct and in accord with the USCG’s long-stan